Crowdfunding or Viral marketing?

In recent weeks I have been talking with a couple of entrepreneurial teams in the early stages of seeking finance.  And inevitably the subject of crowdfunding has come up.

Unlike some in the financial world, I am convinced by the argument that these platforms are here for the long run albeit I do see some disasters ahead as the platforms mature.  And not just whilst the high street bank remains out of reach for many in the start-up world (or at least until bank balance sheets recover yet further and they are prepared to lend for risk).

Equally, one of the things my work has reaffirmed is that there are definitely types of businesses that will potentially ‘fly’ by appealing to the crowd for funding. These, in most part, are those that also want to use the fundraising experience as part of their own marketing, and hence tend to be consumer-orientated (where budgets need to pushed beyond what a start-up can afford) or charitable/cause related (again the same profile issue, albeit ‘with a heart’). Crowdsourcing done well therefore isn’t just about the speed or the money, it is a marketing event in itself.

Nor am I knocking this by the way, since raising money from others is never easy after all.

Given the secrecy over raising funds afforded by some entrepreneurs I met in previous roles (some after all were reluctant to even announce a deal had taken place, let alone who had funded it), crowdsourcing has to be treated by the entrepreneur as one of many options for raising capital, and not as the new great white hope of the funding world.

It is already interesting to see how the better known platforms (Crowdcube and Seedrs for example) are starting to diverge more aggressively in the way they go to market.  Hopefully this continues since there is no doubt that the option remains a very viable one for a new entrepreneur intent on market penetration.

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